23/01: Wine cost and price
After some consideration the aging of wine has been made a separate note.
Wine price spans quite a wide range from $2 to $1000 per bottle. That is if you only count wine that is produced and bought for consumption. If you consider collector wine, you can safely add another couple of orders of magnitude to the upper range. Collecting wine though (as pretty much collecting anything) is immeasurably stupid and won't be discussed here. Even then, the very existence of $1000 bottles gets one thinking, why such a difference? How much of the price is cost of production? If one bottle of wine costs 100 times more than another, does it mean that the wine in the first bottle is 100 times better? Does it cost 100 more to produce it?
I had my suspicions but I had to ask people who might know, so I went to Mark Squires' wine talk forum at Robert Parker's web site. I got my suspicions confirmed.
The production cost of a top-of-the-line wine, second to none is $10 a bottle, and that includes the winemakers profit. Everything else is market value and various markup costs. The most outrageous of the latter is in restaurants, they have long since taken as a rule to double the price they pay themselves.
Below are some details and arguments to support these claims but let's define what constitutes great wine...
Imagine that you want to make a wine of highest quality. You are altruist enough so you want just the minimal profit and the lowest possible price regardless of the market value. You do it on a huge industrial scale so individual salaries of experts, patents etcetera don't matter. You run the production long enough so the startup costs don't matter. You make no compromises: if something measurably improves wine, you do it. You don't do any "religious" traditional things that do not matter like aging it extra 150 years and such. You do it new world style, as ready to drink now as possible and age just as long as it improves. You find the right grapes (or buy chilean alps or something), find the right country to produce to avoid extra costs etc. How much such a wine would cost to make? Here's an answer that I've got from the wine forum on the Robert Parker website.
1. You use the best bottle (u$s 0.70), tin capsule (u$s 0.20), cork (u$s 0.90), and a unique label (u$s 0.20). Cost: u$s 2.00
2. You purchase the best grapes at u$s 50 per quintal (100 kilos). Cost: u$s 0.50 per bottle
3. You purchase the best oak barrels for aging. Overseas, with taxes, you could pay u$s 900 for a new 225-liter oak barrel. Cost u$s 3.00 per 750ml bottle. Note that the oak barrel will be used at least twice, so we could allocate u$s 2.00 for the 1st use and u$s 1.00 for the 2nd use. But for this exercise we´ll use u$s 3.00.
4. A master winemaker may charge between 25.000 and 50.000 dollars for overseeing the process, choosing the grapes, making the blend. If you produce 200.000 bottles the cost is u$s 0.40 per bottle.
5. The winery will charge you between u$s 0.80 and u$s 1.00 for processing and storing the wine.
6. The cost of designing a label may run u$s2.000. Cost is peanuts if you produce 200.000 bottles.
7. A fancy 12-bottle case may cost u$s 1.40 or roughly u$s 0.12 per bottle
7. Consider you want a 20% profit: u$s 7.02 div 80% = u$s 8.78
8. Consider some taxes and other miscellaneous costs of 1.12
Estimated cost of a great wine: u$s 9.90
Certain importers in the US will charge you a fullfilment fee of u$s1.55 per case. This includes obtaining FDA and BATF label approvals, accounting, storage, logistics, etc. Estimate u$s 0.13 per bottle. Est. total cost: u$s 10.03
All of these numbers are pure ESTIMATES and you can look to cut corners in most categories.
Telephone, Mailing, T&E, POS materials, can be costly. Even if you spend u$s 200.000 at the outset, that´s u$1.00 per bottle if you produce 200.000 bottles.
Admittedly, you cannot make, for example, a great californian wine for $10 a bottle, the cost of grapes alone would be 10 times higher. Still, even producing great wine in California you will never cross $30 per bottle in production costs.
Here's a good article on wine production costs.
Wine price spans quite a wide range from $2 to $1000 per bottle. That is if you only count wine that is produced and bought for consumption. If you consider collector wine, you can safely add another couple of orders of magnitude to the upper range. Collecting wine though (as pretty much collecting anything) is immeasurably stupid and won't be discussed here. Even then, the very existence of $1000 bottles gets one thinking, why such a difference? How much of the price is cost of production? If one bottle of wine costs 100 times more than another, does it mean that the wine in the first bottle is 100 times better? Does it cost 100 more to produce it?
I had my suspicions but I had to ask people who might know, so I went to Mark Squires' wine talk forum at Robert Parker's web site. I got my suspicions confirmed.
The production cost of a top-of-the-line wine, second to none is $10 a bottle, and that includes the winemakers profit. Everything else is market value and various markup costs. The most outrageous of the latter is in restaurants, they have long since taken as a rule to double the price they pay themselves.
Below are some details and arguments to support these claims but let's define what constitutes great wine...
Imagine that you want to make a wine of highest quality. You are altruist enough so you want just the minimal profit and the lowest possible price regardless of the market value. You do it on a huge industrial scale so individual salaries of experts, patents etcetera don't matter. You run the production long enough so the startup costs don't matter. You make no compromises: if something measurably improves wine, you do it. You don't do any "religious" traditional things that do not matter like aging it extra 150 years and such. You do it new world style, as ready to drink now as possible and age just as long as it improves. You find the right grapes (or buy chilean alps or something), find the right country to produce to avoid extra costs etc. How much such a wine would cost to make? Here's an answer that I've got from the wine forum on the Robert Parker website.
1. You use the best bottle (u$s 0.70), tin capsule (u$s 0.20), cork (u$s 0.90), and a unique label (u$s 0.20). Cost: u$s 2.00
2. You purchase the best grapes at u$s 50 per quintal (100 kilos). Cost: u$s 0.50 per bottle
3. You purchase the best oak barrels for aging. Overseas, with taxes, you could pay u$s 900 for a new 225-liter oak barrel. Cost u$s 3.00 per 750ml bottle. Note that the oak barrel will be used at least twice, so we could allocate u$s 2.00 for the 1st use and u$s 1.00 for the 2nd use. But for this exercise we´ll use u$s 3.00.
4. A master winemaker may charge between 25.000 and 50.000 dollars for overseeing the process, choosing the grapes, making the blend. If you produce 200.000 bottles the cost is u$s 0.40 per bottle.
5. The winery will charge you between u$s 0.80 and u$s 1.00 for processing and storing the wine.
6. The cost of designing a label may run u$s2.000. Cost is peanuts if you produce 200.000 bottles.
7. A fancy 12-bottle case may cost u$s 1.40 or roughly u$s 0.12 per bottle
7. Consider you want a 20% profit: u$s 7.02 div 80% = u$s 8.78
8. Consider some taxes and other miscellaneous costs of 1.12
Estimated cost of a great wine: u$s 9.90
Certain importers in the US will charge you a fullfilment fee of u$s1.55 per case. This includes obtaining FDA and BATF label approvals, accounting, storage, logistics, etc. Estimate u$s 0.13 per bottle. Est. total cost: u$s 10.03
All of these numbers are pure ESTIMATES and you can look to cut corners in most categories.
Telephone, Mailing, T&E, POS materials, can be costly. Even if you spend u$s 200.000 at the outset, that´s u$1.00 per bottle if you produce 200.000 bottles.
Admittedly, you cannot make, for example, a great californian wine for $10 a bottle, the cost of grapes alone would be 10 times higher. Still, even producing great wine in California you will never cross $30 per bottle in production costs.
Here's a good article on wine production costs.
Shchtaube wrote:
Hm?